Thursday, September 25, 2008

Government and the housing crisis

Ann Coulter writes a great column about how our government made sure that unqualified borrowers got a lot of mortgages back in the 1990s and early 2000s. Apparently, the Fed, along with the Treasury during the Clinton administration, insisted that "income sources" such as welfare payments and unemployment benefits be counted as income for the purposes of qualifying for a loan.

And we wonder why a lot of these loans are being defaulted upon. May I suggest that we roll back these unsound lending practices BEFORE we bail out Wall Street?

3 comments:

similarly, there was apparently pressure to not use traditional determinants that provided a more robust picture of the financial feasibility of a borrower - they had to rely solely on credit scores, and increase lending to minorities and low income individuals: "affordable housing"

Ms. Coulter may focus on that in her article, but it's something i've been reading about for a week or so also.

Do you remember about ten years ago when the Star-Tribune ran several editorials bemoaning the alleged practice of "redlining", in which financial institutions were accused of ignoring entire neighborhoods due to racism?

Turns out the banks had some very good reasons for not lending money to a lot of those people.

Well, I wasn't in Minnesota at the time, but I sure do remember the papers in Denver saying about the same thing. And I've (out of some morbid curiousity more or less) looked through the foreclosure listings, and they're virtually all 1999 or later, and almost all of them owe more than the original debt.